If you used a text message to send cash to the Red Cross after the Haiti earthquake, or donated credit card points for relief efforts after the temblor in Chile, you may claim those donations on your 2010 tax return like any other charitable offering.
These new ways to donate are making it a little harder to keep track of your good will for tax purposes. Just like any other giving, you must make sure you have the proper documentation.
Text-based donations are typically capped at $10 each, and most mobile phone companies allow a limited number. So for those gifts, or other donations of $250 or less, a statement is likely sufficient. And for other modest gifts, a credit card statement will suffice.
But if you made a donation worth more than $250, including a gift of credit card rewards, you’ll need a letter acknowledging receipt from the charity, said Barbara Weltman, a tax attorney and spokeswoman for J.K. Lasser. That’s because the same rules that apply for an ordinary cash donation apply for an unconventional method like giving up your cash back rewards.
If you made a donation but don’t receive a letter noting the amount, contact the charity and ask for one, she advised.
The rules requiring documentation for even small donations went into effect three years ago.
“If you drop the cash in the kettle for the Salvation Army, it’s not going to be deductible,” Weltman said. The same applies to the Sunday collection plate: if you don’t use checks or envelopes the church can acknowledge, you can’t claim those donations at tax time.
Here are some other rules to be aware of when itemizing charitable donations on your return:
— You must file a Form 1040 and itemize deductions on Schedule A to claim charitable donations.
— If you made a donation to Haiti relief before March 1, 2010, and claimed it on your 2009 return, you cannot claim the same donation for 2010. The earthquake occurred on January, 21, 2010.
— Donations to religious organizations, nonprofit schools and hospitals, scientific, veterans and service organizations are deductible. Money given to civic associations, chambers of commerce, lobbying groups, political groups or candidates and labor unions may not be claimed.
— You can claim out-of-pocket expenses for volunteering, and some transportation costs, but not the value of your time. That includes professionals who perform services related to their field for charitable groups.
— If you made a donation and received a gift or service in return, you can only claim the value of your donation that exceeds the price of the gift. So if you sent money to the local public radio station and got a tote bag, the market value of the bag must be subtracted from your donation. If you attended a hospital dinner dance, the value of the meal is taken off the price of the ticket. If the item you received has a token value and you have a letter from the organization that says so, you may claim the entire contribution.
— If your donation gives you the rights to purchase something else, you may deduct 80 percent. For instance, if you gave $300 to a theater group or athletic scholarship program at your alma mater, and in return you have the right to buy a ticket in a special section for opening day, you may claim $240.
— If you made an in-kind donation of clothing, furniture or other items, you must have a receipt. Most charities, however, will not place a value on those items for you. Some tax preparation software offers help valuing donated items. Or you may estimate the value based on prices of comparable goods at a local thrift store.
— If you donated a car or other vehicle, you may deduct the proceeds from the charity’s sale of the vehicle, or the vehicle’s fair market value at the date of contribution. If you e-file your return, you must mail the IRS’s portion of Form 1098-C, which you received from the charity, to the IRS separately.
— More details on charitable contributions are available at the IRS website at www.irs.gov , Publication 526.
Source: The Associated Press.